Inflation

In minutes from the Fed's July meeting, officials highlighted the risks of inflation outweighing concerns over the labor market, which investors overlooked.

U.S. consumers probably experienced a slight pickup in underlying inflation in July as retailers gradually raised prices on a variety of items subject to higher import duties.

Officials are balancing food and retail payroll tax and wage inflation risks against mounting jobs losses and a "subdued" economy that could dampen future price pressures.

Two policymakers have suggested they might support a cut at the July meeting, but most others have signaled they want more time to assess the impact of tariffs on inflation.

The recent rally was driven by economic data that reinforced wagers on at least two rate cuts this year, as well as speculation President Donald Trump will name a more dovish successor to Jerome Powell.

The Federal Reserve's preferred measure of inflation moved further from its 2% target, underscoring the central bank's reluctance to cut rates.

Markets are currently wagering the US central bank will cut interest-rates once more with around a 70% chance of a second move this year.

Price growth continued to trend toward the Federal Reserve's 2% target, but not enough to spur action from the central bank.

Federal Reserve Gov. Michael Barr said global supply chain disruptions and inflation caused by tariffs could weigh heaviest on small businesses, especially those with little access to credit.

The slowdown reflected a decline in energy costs, used vehicles, and airfares. Motor vehicle insurance — a main source of inflation in recent years — also retreated.